21 May 2013
Deducting Charitable Contributions
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Walking into the garage or shed can be a nightmare for some of us, with literally piles upon piles of unwanted stuff just sitting there taking up space. While that neon green jacket may have swooned the ladies back in the eighties, chances are probably good that you will not be wearing that jacked again. So with that being said, why not donate it along with the other unwanted items you may have sitting around? There are a number of charitable organizations out there that would be more than happy to accept your donation. At Fire Dawgs, we are also happy to pick and donate items on your behalf with our trusted junk removal service. While helping out someone in need is reason enough, did you know that charitable donations can even be deducted from your taxes?
Its true believe it or not, most charitable contributions can bring about a tax deduction when you go to file taxes for the year. Of course, the Internal Revenue Service (IRS) has become a bit stricter in what qualifies as a charitable donation so it would be a good idea to arrange a consultation with your financial advisor, or at least do your own research into the matter. The last thing you want to be faced with is an audit; especially for something you had intended to help out someone in need. However, with the service provided by Fire Dawgs, when you call us for junk removal Indianapolis can trust, we do our best to donate items on your behalf and when able to do so, we get an official tax deductible receipt that you can use with your return.
In most cases, any donations or contributions made to an organization or charity deemed a 501(c)(3) nonprofit qualifies as an eligible tax-deductible donation. A few examples of a 501(c)(3) nonprofit organization include senior homes, schools, hospitals, the Salvation Army, and many more. Most organizations that are indeed designated as a 501(c)(3) nonprofit will bear some sort of marking or confirmation, but if you are unsure as to whether or not a specific donation is deductible, just ask. Most charities will tell you upfront that your contribution is tax deductible. Keep in mind though that some charities, as well as churches, are not required to register as tax-exempt with the IRS, but donations to these organizations may still be deductible.
There is usually some confusion as to what exactly can be deducted, but in all reality just about anything can be donated; however, the tax stipulations vary with each type of donation. Most people find that writing a check is much easier than lugging a box of unwanted stuff around, so monetary donations are quite popular. In most cases, cash donations can be deducted completely for up to half of a person’s adjusted gross income.
By no means though are monetary donations the only type of contribution eligible for a tax deduction; some non-cash donations are eligible too! However, there are a few things you need to keep in mind as far as taxes are concerned. For instance, in the case of donating property, if the property has been in your possession for more than a year, than the deduction can only be equivalent to the fair market value of the property. The IRS views fair market value simply as how much a certain piece of property would sell for on the open market.
One aspect of non-cash donation that always raises questions comes with the donation of a vehicle. While we would like to believe some people are better than that, vehicle donation usually comes with its fair share of fraud and other malicious intent, so the IRS views this type of donation much more seriously than others. While it is best to consult a tax professional when donating any type of vehicle—car, truck, boat, RV, etc.—It is a generally accepted principle that the vehicle’s value on the open market must total $500.00 or more. Furthermore, in order to abstain from any other IRS trouble, have the charity in which you made the donation to provide you with some sort of written confirmation that verifies your donation.
Typically, when deducting for charitable contributions, one must opt to itemize on their tax return. The IRS gives everyone a standard deduction which varies with each year. However, for those who feel like their total deductions will amount to more than the standard deduction, itemizing is the option that allows one to receive the maximum amount on their return. If you do plan on making any charitable contributions, then you must itemize these deductions on Schedule A, as well as file a 1040.
When all is said and done though, tax stipulations aside, the important thing to keep in mind is that your contributions are going to directly impact a needy cause in a positive manner; whether it be just a fellow down on his luck, or a bankrupt family who has suddenly found themselves homeless. Moreover, while the information above is intended to be used as a sort of primer, before donating or deducting any kind of contribution, it would be best to consult a tax professional. Because tax laws are changing and moving around every year, what qualified for a deduction last year may not qualify this year.